A heap of stimulus: 'Cash for clunkers' bill could jumpstart new auto sales

WASHINGTON -- A wide-ranging program that would give consumers turning in old clunkers cash vouchers worth up to $5,000 to buy new, more fuel-efficient vehicles was introduced Tuesday in Congress.

The bill aims to boost car sales in the midst of the recession, help struggling consumers buy new cars and cut pollution by taking some of the oldest, dirtiest cars off the road.

An earlier version of a so-called "cash for clunkers" incentives ran into union opposition that it could end up favoring imports. To avoid that problem, this new measure awards an extra $1,000 for vehicles assembled in the United States.

"It's good for Detroit and good for America," said Rep. Betty Sutton, D-Ohio. "There is a sense of urgency with car sales slumping." Sutton added that higher sales could keep jobs in the U.S.

The bill proposes giving consumers vouchers to buy new, more fuel-efficient vehicles in exchange for turning in vehicles at least eight years old. The program is dubbed the Consumer Assistance to Recycle and Save bill, or CARS Act.

Sutton noted that 60 percent of vehicles in the United States are old enough to qualify. The bill would award higher vouchers for vehicles assembled in North America -- up to $5,000 -- versus up to $4,000 vouchers for vehicles assembled outside North America, and would not apply at all to vehicles made outside North America. The proposal was endorsed Tuesday by Detroit's Big Three automakers and the United Auto Workers.

To qualify, consumers would have to buy a vehicle more fuel-efficient than their current car or truck. The new vehicles also would have to be priced at $35,000 or less.

The bill would offer a $7,500 cash voucher starting in 2010 for plug-in electric hybrids that get 100 mpg or more. Car owners also could turn in their vehicles in exchange for a mass transit voucher worth up to $3,000.

Rep. Candice Miller, R-Harrison Township, is among the initial co-sponsors.

GM chairman and CEO Rick Wagoner told reporters in Washington Tuesday that a bill to offer cash for older cars -- often dubbed "cash for clunkers" -- could benefit the auto industry.

"These kind of programs can have a huge impact," Wagoner said, saying it could boost consumer confidence. "It would be very helpful to have something like that here in the United States."

He pointed to a roughly 15 percent increase in auto sales in Germany last month over a year ago after they introduced a similar program. According to published reports, the German "scrappage" incentive boosted new-car registrations during February to the country's highest level in a decade.

Ford Motor Co. also praised the bill.

"The 'CARS Act' legislation is a win-win-win for consumers, the environment and energy independence," the company said in a statement.

"By providing incentives to purchase a new vehicle, the legislation would help reduce consumer costs, jumpstart the economy and help support millions of good jobs in every state across the nation."

Alan Reuther, legislative director for the United Auto Workers, said the union also supports the bill. "We believe it will stimulate sales of new vehicles, and thus help the industry and create jobs for American workers," Reuther said.

The bill could help speed the improvement of the fuel efficiency of the auto fleet. Automakers must increase the efficiency of their vehicles by at least 40 percent to a fleet-wide 35 mpg by 2020.

Buckets of cash for buckets of bolts

Several initiatives already are in place to get old cars off the road:

Texas unveiled a $45 million annual program in 2008, dubbed "Drive a Clean Machine," which offers up to $3,500 toward a new vehicle for lower-income consumers in Austin, Houston and Dallas-Fort Worth who own vehicles at least 10 years old. In six months, the program retired more than 11,000 vehicles.

California , home to 33 million cars and trucks, or 13.5 percent of the nation's fleet, runs a similar program that spends $50 million a year to give lower-income residents up to $1,500 to retire vehicles that fail emissions tests or $500 to have them repaired. It has no income requirements. The program replaced 16,000 vehicles last year.

Canada

launched a national program on Jan. 1 that aims to get 50,000 vehicles, or 1 percent of its older vehicles, off the roads. The $92 million, three-year program will offer Canadians $300 cash or a discount on a bicycle or a public transit pass in exchange for their older vehicle.

American drivers junked about 13 million vehicles in 2007, or 5.2 percent of all vehicles, up from 5 percent in 2006. A 2008 report from auto analysis firm R.L. Polk said the median age in 2007 of passenger cars was 9.2 years and for light trucks it was 7.1 years. Source: Detroit News research

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